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Rent and service charges explained

PostedTuesday, 11 April 2017
by Rose Sudnik

Rent charges

All tenancies are subject to a rent charge. Rents are used by landlords to cover the landlord’s costs relating to the property, including the costs of housing management, repairs, maintenance and insurance. This is described as the NET rent.

In addition to the NET rent some tenancies have a charge for services in connection with the property, not covered by the rent; this is called service charge. Alongside this residents may also pay other charges (usually water rates).

Your service charge explained

A service charge is a payment made by a resident for services received in connection with the occupation of his or her home.

We calculate service charges separately to rent and they are not affected by the Government’s rules on rent.

Tenancies used by Johnnie Johnson Housing have fixed service charges.

This means that:

The charge is set on an annual basis (at the time rents are reviewed)

If the service charges are more than the costs incurred, Johnnie Johnson Housing will fund the shortfall, but

If the service charges are less than the costs incurred, Johnnie Johnson Housing will keep any surplus

We endeavour to set services to minimise the level of shortfall or surplus.

If a resident is unhappy with their rent and/ or service charges, they can contact the FirstTier Tribunal (Property Chamber - Residential Property).

The tribunal will determine if the calculation has been carried out correctly and legislation has been followed in relation to the increase. Please note that the tribunal also has the power to increase rents as well as lower them.

Common services provided

Below are typical examples of services provided to Independent Living properties (these examples are for illustration and services will vary from scheme to scheme).

Cleaning of common areas

Gardening and maintenance of grounds

Provision for depreciation, repairs and renewal of door entry system

Provision for depreciation repairs and renewal of TV aerial installation

Value Added Tax incurred in the provision of services (in so far as not recoverable from H.M. Revenue and Customs)

Why do we depreciate some service charge items

Some items have a life of more than five years and these items are depreciated over the assessed life of the item. An example is carpets or floor coverings in common areas. We might assess the carpets as having a life of 10 years. So, for example, let us say the cost of the carpets is £10,000, by spreading the cost over 10 years residents pay £1,000 per year (this £1,000 may then be apportioned by number of properties in the scheme, to allow distribution of costs where an item benefits all residents)

Further examples of service charge items that are depreciated include:

Carpets and furnishings

Furniture

Alarm monitoring/door entry systems

White goods (cookers and fridges)

By spreading the cost over the life of the item the costs to residents are reasonable and fair.

Apportionment: How are service charges shared out between properties

The sharing out of costs is known as apportionment. For example where we have a scheme receiving gardening services for communal areas which benefit all residents, we will normally apportion the cost between each property, depending on type, i.e. number of bedrooms.

Services charges which are not eligible for Housing Benefit and Universal Credit

Some service charges do not qualify for Housing Benefit Payments (or Universal Credit) these include:

Heating costs relating to an individual property

Alarm monitoring costs

Alarm equipment (where the equipment does not have housing management functionality)

Other charges

In some instances there are other charges included within the gross rent which are not included for the purposes of rent review. The most common example is water charges - these charges are set by local water companies and we have no control over the costs, so this element is variable.

In our general let properties most properties have individual water meters and residents will pay water and sewerage costs directly to the supplier and not as part of ‘other charges’.

In Independent Living Schemes there are normally two ways costs are levied:

By rateable value - when the property was built it was assigned a rateable value by the water company and this rateable value determines the water and sewerage cost charged by the water company.

Where there is no rateable value, water companies levy a sewerage charge and the water charge is based on usage from a water meter. The water meter will usually serve the whole scheme and costs of water used are apportioned between communal areas and flats. The levied sewerage charge will also be apportioned between the properties and the communal area.

Sharing your home with others

Your tenancy agreement explains your rights and responsibilities about other people living in your home.

By law you must not allow too many people to live in your home. Your agreement will give you the permitted or maximum number. Johnnie Johnson Housing has the right to take legal action if your home is overcrowded. However, if you remain within the permitted number you have the right to take lodgers or to sub-let part of your home, without any increase to your rent.

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